Seeking to find an outsider with an insider’s understanding, the NYSE may have hit the jackpot in naming John Reed interim chairman of the world’s largest equity exchange.

The former Citicorp CEO – who is charged with helping the exchange find a permanent successor to Dick Grasso, forced out last week over his $190 million pay package – retired from Wall Street in 2000, after losing a power struggle with then Citigroup co-CEO Sandy Weill.

That hiatus from the Street may work well to Reed’s advantage.

“He’s got deep financial expertise and a solid reputation,” said Charles Elson, head of the Weinberg Center for Corporate Governance at the University of Delaware. “He’s been removed, so he doesn’t suffer the same relationship to all the controversies that others on the board do.”

The move, which drew instant praise, comes after a seemingly endless series of missteps that have left the exchange’s board of directors scrambling to restore both their own credibility and that of the 211-year-old institution.

Reed will be paid $1 for his services – a stark contrast to Grasso’s rich pay package – and said yesterday from an island vacation spot that he would serve “months, not years.”

His tasks will include finding a new chairman as well as ushering the Exchange through a critical period of corporate governance reforms. Those changes will likely include a restructuring of the board, a possible IPO and potential changes in the regulatory responsibilities of the exchange.

” I am gratified that he is willing to take on this critical post,” said SEC chair William Donaldson, who said he has known Reed for years. “He is independent, experienced and has impeccable credentials all of which will be crucial as he works with the NYSE Board to ensure the highest standards of governance.”

Considered an intellect and an technological pioneer, Reed made early, enormous – and wildly successful – bets on the technology behind ATMs and credit card processing.

And while he ran Citicorp for years, he is not considered a Wall Street insider, having spent more of his career focused on banking operations rather than the trading and dealmaking that marks the Street’s titans.

Before he retired from Citigroup in April 2000, he had 4.7 million Citigroup shares, at the time worth about $240 million. Since leaving Wall Street, Reed has been teaching at both Princeton University and the Sloan Business School at the Massachusetts Institute of Technology.

Ironically, it may be departing Citigroup chairman Weill, who maneuvered Reed out of a job in 2000, who set off the chain of events that brought Reed to the NYSE. It was Weill’s nomination to the NYSE board in March – when the bank had just settled massive changes with regulators over conflicted research – that marked the start of the NYSE’s stream of troubles.

“Reed lost to one of the individuals who started the whole controversy,” said Elson, referring to Weill. Weill ultimately withdrew his NYSE board nomination after New York Attorney General Eliot Spitzer expressed outrage over the affair.

Reed has already started reaching out to the NYSE’s various constituencies, making clear he wants their input into the reforms expected. “He’s a great choice,” said one specialist who asked not to be named. “He dealt with regulators and he hasn’t dealt with all this stuff,” referring to the firestorm over Grasso’s pay.

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Who’s the boss?

John Reed, the Big Board’s new interim chief, has a major cleanup on his hands. He’s got 35 years of Wall Street experience under his belt – but the former Citibank CEO is most widely known for his high-profile exit from the newly merged Citigroup, after a power struggle with co-CEO Sandy Weill and former Treasury Secretary Robert Rubin.